Wallach v. Whetstone Partners, LLC
Filing
34
MEMORANDUM AND ORDER. (See Full Order.) IT IS HEREBY ORDERED that defendants' motion to dismiss 21 is granted, and plaintiff's complaint is dismissed without prejudice for lack of personal jurisdiction. A separate Order of Dismissal consistent with this Memorandum and Order is entered this same date. Signed by District Judge Catherine D. Perry on 7/26/2016. (CBL)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
ROGER W. WALLACH, individually )
and on behalf of all others similarly
)
situated,
)
)
Plaintiff,
)
)
vs.
)
)
WHETSTONE PARTNERS, LLC,
)
et al.,
)
)
Defendants.
)
Case No. 4:16 CV 450 CDP
MEMORANDUM AND ORDER
Plaintiff Roger Wallach alleges that he received an unwanted solicitation on
his cell phone from defendants. He purports to bring claims against defendants
under the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227 et seq.,
for himself and on behalf of a nationwide class. Defendants move to dismiss
plaintiff’s complaint for lack of personal jurisdiction under Fed. R. Civ. P.
12(b)(2). Plaintiff opposes dismissal and requests jurisdictional discovery.
Because I lack personal jurisdiction over defendants, plaintiff’s complaint will be
dismissed without prejudice, and the motion for discovery will be denied.
Legal Standard: Rule 12(b)(2) Motion to Dismiss
To survive a motion to dismiss for lack of personal jurisdiction, a plaintiff
must make a prima facie showing of personal jurisdiction by pleading facts
sufficient to support a “reasonable inference that the defendant[] can be subjected
to jurisdiction within the state.” K–V Pharm. Co. v. J. Uriach & CIA, S.A, 648
F.3d 588, 59-92 (8th Cir. 2011); see also, Viasystems, Inc. v. EBM—Papst St.
Georgen GmbH & Co., KG, 646 F.3d 589, 592 (8th Cir. 2011); Miller v. Nippon
Carbon Co., Ltd., 528 F.3d 1087, 1090 (8th Cir. 2008); Dever v. Hentzen Coatings,
380 F.3d 1070, 1072 (8th Cir. 2004); Epps v. Stewart Info. Servs. Corp., 327 F.3d
642, 647 (8th Cir. 2003). A plaintiff’s prima facie showing “must be tested, not by
the pleadings alone, but by affidavits and exhibits supporting or opposing the
motion.” K–V Pharm., 648 F.3d at 592 (quoting Dever, 380 F.3d at 1072–73). I
must view the evidence in a light most favorable to the plaintiff and resolve factual
conflicts in the plaintiff's favor; however, plaintiff carries the burden of proof and
that burden does not shift to defendants. Epps, 327 F.3d at 647.
Background Facts
Defendants Whetstone Partners, LLC and Whetstone Holdings, LLC
(together, Whetstone) are Delaware limited liability companies based in Florida.
Whetstone is not registered to do business in Missouri, does not conduct business
in Missouri, and has no offices, property, or employees in Missouri. Nevertheless,
plaintiff Roger Wallach has sued Whetstone in Missouri, claiming that Whetstone
violated the TCPA by using an automatic dialing system to call him on his cell
phone without his permission. Wallach alleges as follows:
2
20. On or about February 5, 2016, Wallach received a call on his cell phone
in St. Louis County, Missouri from Whetstone Partners, Whetstone Holdings
or someone acting on their behalf.
21. Upon answering the cell phone, Wallach heard a brief pause before
hearing the voice of Whetstone Partners and/or Whetstone Holdings’
representative.
22. Whetstone Partners and/or Whetstone Holdings’ representative advised
Wallach that they were interested in providing him a business loan. This
phone call advertised Whetstone Partners and/or Whetstone Holdings’
products and services . . . .
24. The person acting on behalf of Whetstone Partners and/or Whetstone
Holdings advised that the name of the company interested in providing the
business loan to Wallach was “Price Funding.” The person further advised
Wallach that the website for “Price Funding” was www.pricefunding.com
and that the company was located at 2001 NW 107th Avenue in Miami,
Florida.
Wallach’s complaint goes on to allege that Whetstone’s offices are also located at
2001 NW 107th Avenue in Miami, Florida and that Price Funding’s website
administrative contact is helpdesk@ws-hold.com. Based on that that allegation in
the complaint, Wallach argues that the companies share the same website
administrator.
In support of their motion to dismiss, Whetstone provided the affidavit of
Scott Crockett, the managing member of both Whetstone entities. In addition to
explaining Whetstone’s lack of ties to Missouri, Crockett also avers that Whetstone
does not own or use an automatic telephone dialing system and did not place a
telephone call to Wallach’s telephone number, either directly or through Price
3
Funding. (Doc. #21-1). Crockett further avers that Price Funding is a wholly
owned subsidiary of Whetstone Holdings, but that is has separate employees and
corporate formalities, including a separate profit and loss statement, an
independent sales force, and its own loan management system which is not used by
Whetstone. Price Funding also has its own phone system and customer service
management software. However, Crockett consulted with Price Funding, which
has no record of making a telephone call to Wallach’s number on the date alleged
in the complaint.
In opposition to dismissal, Wallach provided his own affidavit, in which he
avers as follows:
6. One of the persons who spoke to me about the business loan advised me
that the business address of the company was 2001 NW 107th Avenue in
Miami, Florida. The person also advised me that the company’s website
was www.pricefunding.com.
7. I never requested that a company or companies located in Miami, Florida
contact me to discuss a business loan.
8. I have never requested that a company or companies with the website
www.pricefunding.com contact me to discuss a business loan.
(Doc. #28-1). Notably, Wallach never states that he actually received a call from
Whetstone or Whetstone’s representative, as alleged in the complaint. Instead,
Wallach only identifies Price Funding as the caller. Although Wallach argues in
his memorandum in opposition to dismissal that he received a phone “from
Defendants or someone acting on their behalf,” the only evidence cited in support
4
of this assertion is the (unverified) complaint and Wallach’s affidavit, which, as
just discussed, does not actually state that Wallach received a phone call from
Whetstone.
After the motion to dismiss was filed, Wallach filed a motion for
jurisdictional discovery. Wallach argues that he is entitled to jurisdictional
discovery because his complaint “sets forth more than bare allegations concerning
Defendants’ connection to the phone call at issue.” In support of this argument,
Wallach claims that he connected “defendants’ business address to the phone call”
and “Whetstone Holdings to the operation of the website to which Plaintiff was
directed.” (Doc. #31 at 2-3). Wallach concludes that “jurisdictional discovery is
necessary and appropriate” so “that the proper party defendants may be determined
with certainty.” (Id.). Defendants oppose jurisdictional discovery.
Discussion
Before turning to Whetstone’s motion to dismiss, I will deny Wallach’s
motion for jurisdictional discovery. The decision whether to grant jurisdictional
discovery in a case is left to the trial court’s sound discretion. Lakin v. Prudential
Securities, Inc., 348 F.3d 704, 713 (8th Cir. 2003). I may deny jurisdictional
discovery where a plaintiff has failed to make a prima facie case of jurisdiction.
Viasystems, Inc. v. EBM-Papst St. Georgen GMBH & Co., KG, 646 F.3d 589, 598
(8th Cir. 2011)(“[w]hen a plaintiff offers only speculation or conclusory assertions
5
about contacts with a forum state, a court is within its discretion in denying
jurisdictional discovery.”) (alteration in original; internal quotation marks and
citation omitted). Because I find that Wallach has not made a prima facie case of
personal jurisdiction for the reasons set out below, I will deny jurisdictional
discovery and dismiss the complaint. See Osborn & Barr Communications, Inc. v.
EMC Corp., Inc., 4:08CV87 CAS, 2008 WL 341664, at *1 (E.D. Mo. Feb. 5,
2008) (jurisdictional discovery is not appropriate vehicle to uncover evidence
supporting jurisdiction; it is plaintiff’s obligation “to undertake at least enough
minimal investigation prior to filing a complaint as to permit it to allege a basis for
jurisdiction in the complaint.”) (internal quotation marks and citation omitted).
“Personal jurisdiction can be specific or general.” Viasystems, 646 F.3d at
593. “Specific jurisdiction refers to jurisdiction over causes of action arising from
or related to a defendant’s actions within the forum state . . . .” Miller, 528 F.3d at
1091 (quoting Bell Paper Box, Inc. v. U.S. Kids, Inc., 22 F.3d 816, 819 (8th Cir.
1994)) (internal quotation marks omitted). General jurisdiction exists when a
defendant has “‘continuous and systematic’” contacts with the forum state so as “to
render [the defendant] essentially at home in the forum State.” Goodyear Dunlop
Tires Operations, S.A. v. Brown, 131 U.S. 2846, 2851 (2011) (quoting Int’l Shoe
Co. v. Washington, 326 U.S. 310, 317 (1945)).
6
“Where, as here, the court’s subject matter jurisdiction is premised upon a
federal statute or other federal question, rather than diversity of citizenship, a
prima facie case for personal jurisdiction requires two elements.” Velez v.
Portfolio Recovery Assoc., Inc., 881 F. Supp. 2d 1075, 1081 (E.D. Mo. 2012).
“First, the plaintiff must demonstrate that haling the defendant into court accords
with the Due Process Clause.” Id. “Second, the plaintiff must show that the
defendant is amenable to service of process from the court in question.” Id.
“When the relevant federal statute is silent as to service of process, as is the case
here, a court may exercise personal jurisdiction only to the extent permitted by the
forum state’s long-arm statute.” Id. at 1082. “Thus, determining amenability to
service requires the same personal jurisdiction inquiry and concomitant minimum
contacts analysis applicable when the court exercises diversity of citizenship
subject matter jurisdiction and brings the familiar Fourteenth Amendment analysis
back into play.” Id. (internal quotation marks and citation omitted).
Due process requires that a non-resident have minimum contacts with the
forum state such that the maintenance of the lawsuit does not offend traditional
notions of fair play and substantial justice. World–Wide Volkswagen v. Woodson,
444 U.S. 286, 291–92 (1980); Int’l Shoe Co. v. Washington, 326 U.S. 310, 316
(1945); Guinness Import Co. v. Mark VII Distribs., Inc., 153 F.3d 607, 614 (8th
Cir. 1998). Minimum contacts is based on the notion that “those who live or
7
operate primarily outside a State have a due process right not to be subjected to
judgment in its courts as a general matter.” J. McIntyre Mach., Ltd. v. Nicastro,
131 S.Ct. 2780, 2787 (2011). A defendant’s contacts with the forum state must be
sufficient so that a non-resident defendant should reasonably anticipate being haled
into court there. World–Wide Volkswagen, 444 U.S. at 297; Stanton v. St. Jude
Med., Inc., 340 F.3d 690, 694 (8th Cir. 2003); Epps, 327 F.3d at 648. Sufficient
minimum contacts requires some act by which the defendant “purposely avails
itself of the privilege of conducting activities within the forum State, thus invoking
the benefits and protections of its laws.” J. McIntyre, 131 S.Ct. at 2787 (quoting
Hanson v. Denckla, 357 U.S. 235, 253 (1958)); see Romak USA, Inc. v. Rich, 384
F.3d 979, 984 (8th Cir. 2004).
The “purposeful availment requirement ensures that a defendant will not be
haled into a jurisdiction solely as the result of random, fortuitous, or attenuated
contacts or of the unilateral activity of another party or a third person.” Stanton,
340 F.3d at 693–94 (quoting Burger King v. Rudzewicz, 471 U.S. 462, 475
(1985)). “For a State to exercise jurisdiction consistent with due process, the
defendant’s suit-related conduct must create a substantial connection with the
forum State.” Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014). This means that “the
relationship must arise out of contacts that the defendant himself creates with the
forum State.” Id. at 1122 (quoting Burger King, 471 U.S. at 475). Contacts
8
between the plaintiff and the forum State do not satisfy this inquiry. Id.
“Jurisdiction is proper, however, where the contacts proximately result from
actions by the defendant himself that create a substantial connection with the
forum state.” Stanton, 340 F.3d at 694 (quoting Burger King, 471 U.S. at 475).
I am to apply a five-factor test to determine the sufficiency of a non-resident
defendant’s contacts with the forum state. Dever, 380 F.3d at 1073. The five
factors are: 1) the nature and quality of contacts with the forum state; 2) the
quantity of the contacts; 3) the relation of the cause of action to the contacts; 4) the
interest of the forum state in providing a forum for its residents; and 5)
convenience of the parties. Id. at 1073–74 (quoting Burlington Indus., Inc. v.
Maples Indus., Inc., 97 F.3d 1100, 1102 (8th Cir. 1996)). I should give significant
weight to the first three factors. Id. at 1074; Fastpath, Inc. v. Arbela Techs. Corp.,
760 F.3d 816, 821 (8th Cir. 2014).
Here, Wallach cannot satisfy either Missouri’s long-arm statute1 or the Due
Process Clause2 because there is no evidence that Whetstone has had any contact
Missouri’s long-arm statute, Mo. Rev. Stat. § 506.500.1, authorizes the exercise of personal
jurisdiction over an entity that transacts business in Missouri when the cause of action arises
from such transaction or if a defendant commits a tort within the state. Mo. Rev. Stat. §
506.500.1(1) and (3). If the tortious act is committed outside of Missouri, the long-arm statute
will apply as long as the act “produces actionable consequences” in Missouri. Noble v. Shawnee
Gun Shop, Inc., 316 S.W.3d 364, 371 (Mo. Ct. App. 2010).
1
2
Although the Eighth Circuit has suggested the Missouri long arm statute and the Due Process
Clause are not identical in scope and should be analyzed separately, Viasystems, 646 F.3d at 593
n.2, in a case such as this, where there is no evidence of any contact between defendants and the
forum state, the analysis necessarily overlaps. In any case, in reaching my decision I have
9
with Missouri, let alone contacts sufficient to establish personal jurisdiction in this
case. Wallach offers nothing more than the bare allegation in his complaint that
defendants contacted him, but this allegation is refuted both by his own affidavit –
in which he admits that Price Funding (not Whetstone) called him – as well as the
uncontroverted evidence submitted by Whetstone that it never contacted Wallach.
Moreover, the uncontroverted evidence establishes that Whetstone is not registered
to do business in Missouri, does not conduct business in Missouri, and has no
offices, property, or employees in Missouri. Wallach’s speculative and conclusory
assertions that this Court can exercise personal jurisdiction over Whetstone in this
case merely because Whetstone and Price Funding share a mailing address and
website administrator are inadequate to demonstrate a prima facie case of personal
jurisdiction over Whetstone. Stated otherwise, there is no evidence to support the
bare allegation that Whetstone ever contacted Wallach or had any contact with
Missouri to support the exercise personal jurisdiction in this case.
Nor can the alleged contacts of Price Funding be imputed to Whetstone for
purposes of establishing personal jurisdiction over defendants under Missouri’s
long-arm statute or the Due Process Clause. Although Price Funding is a wholly
owned subsidiary of one of the defendants (Whetstone Holdings), it is well-settled
that a parent corporation is not subject to the personal jurisdiction of a state as the
considered Missouri’s long-arm statute separately from the Due Process Clause and find that
Wallach has failed to establish a prima facie case of personal jurisdiction under either.
10
result of the mere presence or actions of its wholly owned subsidiary. Epps, 327
F.3d at 649. The Eighth Circuit has held that “the fiction of a corporate entity may
be disregarded, where one corporation is so organized and controlled and its affairs
are so conducted that it is, in fact, a mere instrumentality or adjunct of another
corporation.” Id. To demonstrate that two entities are alter egos of one another
such that the contacts of the subsidiary may be attributed to the parent for purposes
of establishing personal jurisdiction, a plaintiff must show that there is such a unity
of interest and ownership that the separate entities no longer exist and that failure
to disregard the separate identities would result in fraud or injustice. Velez, 881 F.
Supp. 2d at 1084. “The alter ego test is satisfied only where the record indicates
that the parent dictates every facet of the subsidiary’s business – from broad policy
decisions to routine matters of day-to-day operation.” Id. at 1084-85 (internal
quotation marks and citation omitted).
Applying these principles, the Court finds that a shared mailing address and
website administration with Price Funding are insufficient to satisfy the alter ego
test and establish a prima facie showing of personal jurisdiction over Whetstone.
Price Funding has separate employees and corporate formalities, including a
separate profit and loss statement, an independent sales force, and its own loan
management system which is not used by Whetstone. Notably for this case, Price
Funding also has its own phone system and customer service management
11
software, which it uses to market its own loan products. As there is no evidence to
satisfy the alter ego test3 and the Eighth Circuit has rejected an “agency theory” of
jurisdiction, see Viasystems, 646 F.3d at 596, the Court cannot exercise personal
jurisdiction over Whetstone consistent with either Missouri’s long-arm statute or
due process.
Accordingly,
IT IS HEREBY ORDERED that defendants’ motion to dismiss [21] is
granted, and plaintiff’s complaint is dismissed without prejudice for lack of
personal jurisdiction.
A separate Order of Dismissal consistent with this Memorandum and Order
is entered this same date.
____________________________
CATHERINE D. PERRY
UNITED STATES DISTRICT JUDGE
Dated this 26th day of July, 2016.
Even if there were some evidence to satisfy the alter ego theory with respect to Price Funding’s
corporate parent Whetstone Holdings, Wallach has failed to explain how this theory would also
permit the Court to exercise jurisdiction over co-defendant Whetstone Partners, which has no
ownership interest in Price Funding.
3
12
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?